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`Pizza Pizza' And Tigers, Too

September 13, 1992

People

`PIZZA PIZZA' AND TIGERS, TOO

"Can't you move back a little?" Mike Ilitch asks with a weary smile. "The close-ups are killing me." The chairman of Little Caesars Enterprises Inc. is trying his best to be cordial in the sweltering heat of a Tiger Stadium press conference. But he hates more than anything having his picture taken, and for the 14th time today, a TV crew is asking why he bought the Detroit Tigers and what he plans to do with the team. Beads of sweat well up near his hairline and make a break for his shirt collar. He'd like to dab them, but the camera is holding him hostage.

Out on the field, the rest of the Ilitch clan is having a much better time. They're doing exactly what you would if your father had just bought a Major League Baseball team. One son mugs on the pitcher's mound, while his girlfriend goes into a windup, pretending to spit tobacco juice. A brother-in-law is sitting in the dugout, ogling his wife's legs from the bench ("Hey, Honey, this is quite a view!"). Dad, a former minor-league shortstop, would not mind being out there himself. But being a local hero carries with it certain responsibilities.

Detroit is in love with Michael Ilitch. After years of turmoil, economic strife, and mediocre pitching, the Motor City sees its salvation in the person of a 63-year-old pizza baron who grew up poor on Detroit's West Side. Ilitch has not only nurtured Little Caesars into a thriving national chain but he's also become a champion of urban redevelopment, renovating the historic Fox Theater and an attached office building in downtown Detroit to house his headquarters. And if he does for the Tigers what he did for the National Hockey League's Detroit Red Wings--which he bought in 1982--he'll put some life and cash back into a dispirited franchise badly in need of both.

Detroiters, of course, spent the 1980s enamored of another up-by-the-bootstraps pizza mogul: Thomas S. Monaghan, the founder of rival Domino's Pizza Inc., was the guy who sold the money-losing Tigers to Ilitch. Monaghan, who grew up an orphan in nearby Ann Arbor, bought the Tigers in 1983 and delivered a World Series title the following year. Since then, though, he has let both Domino's and the team slip, while his personal eccentricities have become just another source of embarrassment for a city grown weary of excessive executive egos.

ROLLING IN DOUGH. Privately held Domino's lost $48.2 million last year, on declining sales of $2.47 billion. The reason: Monaghan had to pare down debt, and he took a $42 million write-off when he unloaded assets, including a resort island in northern Michigan and several antique cars.

The Ilitch empire couldn't be more different. First of all, it's expanding. Fast. Little Caesars' operating results are a closely guarded secret, but the chain's revenues have grown at a 42% compound annual rate since 1987, and margins are generally acknowledged to be strong. The Fox Theater is a huge moneymaker, and the Red Wings are one of hockey's most valuable franchises. For evidence of Ilitch's liquidity, take a look at the Tigers purchase: He took care of the $85 million price tag in cash and says he's got plenty left to shore up the team.

The Ilitch family also is eminently down-to-earth--in contrast to Monaghan, whose public persona runs from swooping down to Tiger games in a private helicopter to making inflammatory statements against abortion. "Mike Ilitch is the kind of guy you'd like to have a beer with," says University of Michigan Professor David J. Brophy, who sits on a board with the Little Caesars chairman.

Ilitch has never lost his Michigan twang or bar-stool wit. He owns 100% of Little Caesars and runs it as much like a family pizzeria as is possible for a $2 billion company. His wife, Marian, was bookkeeper when the couple first opened a restaurant in 1959 and still acts as the chief financial officer. Of the seven Ilitch children, daughter Denise Ilitch Lites is executive vice-president for marketing. Four other kids and one son-in-law are executives with the company. Two more children have worked there at one time or another.

Neither Mike nor Marian has a college degree. When they met in 1954, he was playing for minor league teams such as the Tampa Smokers, a Detroit farm club. She was a reservations clerk at Delta Air Lines Inc. Sidelined in Detroit because of an ankle injury, Mike accepted a blind date with his future wife mostly to please his father, a Macedonian immigrant who was working as a tool-and-die man at Chrysler Corp. Sotir Ilitch thought baseball was "a bum sport" and hoped the daughter of one of his friends would help his son settle down.

Although the couple had to overcome some initial disappointment ("I thought he'd be tall and blond like Al Kaline," Marian says), the two were married within a year of their first date. Mike played ball for another year, then sold aluminum awnings. But before long, he decided to get into the restaurant business. In 1959, they took $10,000 in savingsto open their first pizza joint. Mike twirled dough in the back, and Marian ran the cash register up front.

Litle Caesars was hardly a hot growth company in the early years. The first franchise was sold in 1962, and by the time Ilitch bought the Red Wings in 1982, there were only 300 stores. It wasn't until 1988, when the company started a national ad campaign, that Little Caesars took off. Now the number of stores tops 4,000, of which 25% are company-owned.

TWO FOR ONE. Ilitch felt it was important for his wife to work in the business. "I had read and heard that when women were widowed, unscrupulous lawyers moved in," he says. "I wanted to get her prepared." As it turned out, Mike and Marian came together like a crack double-play team. Their roles were distinct but symbiotic: Mike handled the marketing and the menu, and Marian took care of the money. As son Mike Jr. puts it, "Dad makes it. Momtakes it."

By the mid-1980s, that relationship had become crucial. Monaghan had revolutionized the pizza business by finding a profitable way to deliver pies in 30 minutes. To keep growing, Little Caesars had to solidify its own niche. Mike came up with a simple idea: lock up the carryout business by offering two pizzas for one low price. He called it "Pizza, Pizza" and made it a chainwide policy. Daughter Denise, in concert with Saatchi & Saatchi's Cliff Freeman of "Where's the beef?" fame, developed a clever set of ads to drive home the value concept. In one award-winner, a baby in a high chair is whisked around its house at the end of a stretchy strand of mozzarella.

To make the strategy work, however, Little Caesars has to be the low-cost producer. Having no delivery trucks saves on gas and insurance. Bare-bones staffing cuts down on payroll. The pizzas are good, but not loaded with ingredients. And franchisees are discouraged from buying expensive computer systems and opening off-site offices. "I encourage them to do their books by hand for the first year," Marian says. She rides herd on costs by keeping debt low and insisting on a separate profit-and-loss statement for each company-owned store. Little Caesars consolidates its financial statements, of course. But by tracking units individually, "I try to make each store stand on its own," Marian says.

The Ilitches admit that working all in the family has its dicey moments. "We're not the Waltons," says Mike Jr., who is head of human resources. Arguments flare up, and boundaries between family and work break down. Mike Sr. says it's often a struggle to balance the roles of CEO and father. As Little Caesars has grown, consultants have sometimes raised red flags about the company's family structure. "We pay them for the other advice they give," Mike says.

DIFFERENT BALL GAME. Most industry experts agree that Little Caesars has carved itself a secure slice of the pizza business. Now the question is whether Mike Ilitch might be overreaching with his purchase of the Tigers. Both he and Marian insist they can afford the franchise--despite predictions that it will lose money for several years. They point to the Red Wings, which turned profitable within five years and won three Norris Div. championships. Mike considers sports a labor of love. Marian agrees, but she still winces as she remembers the night Mike became so enthralled with the team's performance that he ran down to the locker room to give each player a $5,000 bonus. "Holy cow," she says, rolling her eyes.

Baseball, to be sure, is not hockey. Shrinking television revenues, expanding player salaries, and intractable labor disputes have stymied many a smart owner. Consider this: The Red Wings' total player payroll last year was about $6.25 million. If Ilitch signs Tiger superstar Cecil Fielder to a new contract next year--and he says he will--it could easily run that high all by itself. Then, there's the mental strain. During the NHL strike last season, he admitted to Detroit Free Press columnist Mitch Albom that he was personally hurt when his players voted to strike. Baseball will require a thicker skin than that.

The Ilitch family tends to make most of its big decisions sitting around the kitchen table. When the subject turned to the Tigers, the main concern was whether owning the team would thrust the family too much into the public eye. When his kids were growing up, Mike Ilitch tried to drum home a philosophy he had lived by for years: "Be humble, and never toot your own horn. If you do something good, people will find out." Detroit and the rest of the country are finding out. But from now on, the glare will only get brighter.Michael Oneal in Detroit